I'll try and explain the difference; and, of course this is
only my opinion, based upon my knowledge of business and the
mining industry.
A lease would have a fixed term, then end. Of course, the
lease terms would have to be adhered to in order to maintain
the lease during the term of the agreement.
A purchase of the rights does not have a fixed term. As long
as the terms of acquisition are maintained, the purchase would
stay valid forever.
As long as Silver Falcon begins processing the ore dumps in
2008, then opens at least ( 1 ) mine each year during the
term of the purchase, they would keep the rights. So, if
4 years into the agreement, they decide to abandon the
mountain for other pastures, they could sell these rights to
some other mining company. This new mining company could then
take over from where Silver Falcon left off, and there is
nothing that GoldCorp can do about it ( and there is nothing
that GoldCorp would want to do about it, for nothing has
changed as far as it is concerned ). Of course, if they
couldn't find anyone to buy the rights, and they stopped
furthering the captial expenditures of the agreement, then
they would lose their invested capital on the mountain during
a default event, and lose the rights and the money they have
paid for them.
On the other hand, a lease could not be resold; and, a lease
would be infinantly cheaper. If Silver Falcon decided to walk
away after 4 years, Silver Falcon would lose all the capital
that they had put into the mountain, with Loatian absorbing
that capital and able to then resell the lease to someone
else.
So, there is a big difference between a lease and a rights
purchase. This was a very smart business decision by Silver
Falcon, and protects Silver Falcon in the future. Of course,
it assumes that Silver Falcon continues to upgrade the
mountain and open the mines, or sells the rights, in order
to have gained the advantage of the rights purchase vs a
lease.
With the costs of the righs, it places a very high incentive
on Silver Falcon to perform. For this reason alone, I think
that the chances of success with Silver Falcon are higher
than normal. Will they succeed ? Who knows. I'm not a fortune
teller.
